Eigenvalue distribution, matrix size and the linearity of wage-profit curves

Anwar Shaikh () and Luiza Nassif ()
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Anwar Shaikh: Department of Economics, New School for Social Research
Luiza Nassif: Department of Economics, New School for Social Research

No 1812, Working Papers from New School for Social Research, Department of Economics

Abstract: Brody (1997), while experimenting with random matrices, conjectured that the relative size of the second eigenvalue with respect to the first tended to fall as a random matrix got larger. Bidard and Schatteman (2001) proved that in a random matrix with independently and identically distributed entries the speed of convergence increases with the size of the matrix because the relative size of all subdominant eigenvalues tends to zero as the matrix size approaches infinity. Schefold (2010) then showed that zero subdominant eigenvalues imply linear wage-profit curves for any given numeraire. Our concern is with actual input-output matrices. We successively aggregate the US 2002 matrix from 403 to 10 industries and observe the distribution of the moduli of eigenvalues at each level of aggregation. The random matrix hypothesis predicts that both the size of ratio of the modulus of second eigenvalue to the first and the average size of all moduli will fall toward zero as matrix size increases. At an empirical level, we find that the eigenvalue ratio rises while the average size of eigenvalue moduli falls towards a positive constant. These findings do not support the applicability of Brody’s conjecture for real input-output tables, and by implication do not support the hypothesis that wage-profit curves will become strictly linear in the limit. It is still possible to reconcile our findings with empirically observed near-linear wage-profit curves.

Keywords: Input-output; wage-profit curves; eigenvalues; aggregate production function (search for similar items in EconPapers)
JEL-codes: B51 C67 D46 D57 E11 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2018-10
New Economics Papers: this item is included in nep-eff and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Eigenvalue distribution, matrix size and the linearity of wage-profit curves (2020)
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